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Brown's right royal dilemma

Robert Peston | 00:00 UK time, Wednesday, 6 May 2009

Something of importance has been lost in the fraught political row over whether Gordon Brown will press on with the part-privatisation of Royal Mail - which is what on earth will happen to a service that touches all our lives and employs 180,000 people?

Royal Mail vanJust to remind you, Royal Mail is in a frightful state.

It needs hundreds of millions of pounds of investment, to modernise archaic sorting offices.

The recession plus online competition are combining to reduce mail volumes by between eight and 9% - which in a full year would knock well over £600m off revenues.

And an imminent revaluation of an enormous pension fund is likely to assess the net deficit at around £9bn, probably a British record and a millstone humungous enough to sink almost any business.

Now in those circumstances any money raised by selling a minority stake in Royal Mail would be a drop in the ocean.

Or to put it another way, part-privatisation is a mild balm rather than a cure for Royal Mail's financial woes.

So it's easy to see why the trade unions see the disposal of part of Royal Mail as irrelevant at best and pernicious at worst.

Also it's possible to argue from a capitalist perspective that it would be bonkers to sell a stake right now, when market conditions are lousy.

But the prime minister and Peter Mandelson, the secretary of state for business, view it differently. Without the introduction of the private sector as co-owner and manager, they fear that further financial support from the public sector for Royal Mail would be throwing good money after bad.

Nor is the government flush with cash right now. In these straitened circumstances any funds being offered by the private sector represent a stunningly attractive bird in the hand.

Against that backdrop, the business department has presented the stake sale as part of a package that also includes a new regulatory approach and a reduction of the pension-fund burden on the postal service: Mandelson has said that Royal Mail can't have one or two elements alone.

Which has apocalyptic implications. It means there's apparently a choice between part-privatisation of Royal Mail and its bankruptcy.

Not that it would ever come to that. It's counter-intuitive to expect that the sole shareholder in this strangest of public limited companies, the government, would let Royal Mail collapse into administration.

However Royal Mail has not a scintilla of doubt that it can't afford the £830m a year (and probably rising) of contributions it's obliged to make to the pension fund.

So the board of Royal Mail would be absolutely distraught if abandoning the share sale also meant curtains for the government's proposal to take on responsibility for the pension fund's liabilities and assets as of December 16 last year (which was designed to relieve Royal Mail of £280m of cash payments into the fund).

As for a plan to transfer regulation from Postcomm to Ofcom, Royal Mail also thinks that's essential, on the basis that Ofcom may be less likely to view Royal Mail as a beastly monopoly deserving of crippling price controls.

But if Brown and Mandelson went for the U-turn, if they were to abandon the stake sale but pressed on with alleviating the pension burden and changing regulators, that could be seen as an admission of failure in respect of a structure for Royal Mail created only a few years ago by, well, more-or-less the same mob.

Not nice.

What's striking for me is that senior members of the Tory frontbench tell me they're keen to see the part-privatisation take place (and also see Nick Robinson's note on this).

The Tory leader and shadow chancellor rather like the idea that at least part of the serious financial risk associated with Royal Mail would be laid off to an outside investor. And if there's public opprobrium attached to that sale, how nice for a possible future Conservative government that it would be directed today at Brown and Mandelson.

So if Gordon Brown wants help legislating for part-privatisation against the objections of his recalcitrant, writhing backbenchers, the Tories will probably be delighted to supply it,

Gordon Brown won't like the notion that by selling a chunk of Royal Mail, he'll be alienating many of his own MPs and supporters, while doing a terrific favour for George Osborne and David Cameron.

But he won't relish the prospect of abandoning a symbolic part of his industrial strategy.

If he backs away from part-privatisation, it'll be seen by many as further proof that New Labour is being buried on his watch by a reinvigorated old Labour.

Comments

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  • Comment number 1.

    Interesting that you choose to not blog about the NIESR report that says that even raising the retirement age to 70 would mean that taxes would have to raise by 8p in the pound. Not raising the retirement age would require raising taxes by up to 15p in the pound.

    Although the Royal Mail is a large cost, surely the NIESR report is a bigger story?

    http://www.telegraph.co.uk/finance/financetopics/recession/5281206/Britons-face-working-until-70-to-help-bring-public-debt-under-control.html

    http://business.timesonline.co.uk/tol/business/economics/article6229715.ece

  • Comment number 2.

    There is something fundamentally wrong with the post office. I get bills through the post every now and then, but only because if I get my bills online I won't have proof of address for library cards and things like that. The rest of the time some bloke puts a pile of stuff that, if they sent it to me electronically, it would be called spam. On a good day I avoid slipping on it (they are all very glossy and slippery), I pick it up and put it in the bin. A few days later another bloke comes round and takes mine and everyone elses snail mail junk to a land fill - and this is business ?/economics ?/a sensible use of people's time and natural resources ?/job creation ? If your economics tells you this is a good idea, if your financial system tells you this is a good idea then your economics and financial system is a joke. It is also a joke if it leads to the conclusion - re NIESR report #1 that we pay $6 billion a year to the French and Spanish (Net EU payments to the poor Europeans) to have their young teachers lie on a beach for 13 weeks a year while we tell our pensioners to work till they drop. For the few who manage to make it past 70 they've now let that "Dr Death" guy - the one showing people how to do suicides - into do his shows. This will be the basis of our new pension arrangements.
    If you want a financial system that isnt a joke and that realises that thanks to machines we dont have to work anywhere near as hard as we do : 3 day weeks and early retirement for all let the machines do the work ! then try NEFS : Net Export Financial Simulation at www.worldnews.blog-city.com

  • Comment number 3.

    Morning Robert,
    my, what a long way we have come since it was the Royal Mail and its existence was guaranteed by statute.
    The service is much worse than it was, the prices continue to rise way above inflation and still they cannot make it profitable.
    I have to ask, Robert, who stands to gain financially (personally) from a part privatisation?
    Was it not recently that the CEO and directors of Royal mail paid themselves huge bonuses for a job well done?
    Once again the icy fingers of Government have been meddling on the basis of increased competition being good for the consumer. And has it?
    I am surprised that you have Mr Mandelson as an informant as to what is really at stake here, trying to drum up support for a hopeless case.
    The solution is straightforward, classify the Royal Mail as an essential service which cannot be allowed to fail, Taxpayers to underwrite the future pension costs for a fee, sack all the existing management (and I use that term loosely)with no golden goodbyes, inject whatever capital is required to modernise and let's get back to a mail system that works properly.
    Is that not what was proposed for our banking system?

  • Comment number 4.

    you mentioned yourself in YOUR BOOK , that governments past and present encouraged the post office to take pension holidays, added to what GB raided off them couldnt have helped.

    This is not to be seen as an asset that can be sold off. But there are constraints placed on the Post Office that dont make it a level playing field and well you know it.

    The bottom line is for one reason and another the Post Office is in trouble.
    You have mentioned in your article that selling off part of it wont help.

    Options
    let it go bust
    not likely

    Invest money into it
    not likely, although the billions and billions that we are propping up the banking sector is dwarfing the amount the post office need

    solution and I thought of this myself in two minutes so no need for huge consultancy bills or long enquiries

    The post office is an institution.
    you cant send presents or packages via email.
    Post offices are the centre of a lot of communities.
    they employ a lot of people, who turn up everyday for not a great wage.


    Issue a post office bond, for normal people, not institutions, or hedge funds or pensions funds or governments or any or damn dodgy setup that would force or put pressure on the post office to do other than serve the community.

    Use the bonds to buy the infrastructure needed by the post office to modernise and to expand it range of services, instead of working against it like the government and Europe seem to be doing.

    The people who work for the post office can buy bonds too.
    It may sound brutal, but they can have a job and a career , or face getting minimum wage and no pension from the bust nation. So the unions had better get behind this too.

    Make someone from the post office the CEO, NOT someone from the drinking club of westminster.

    Once the post office get back in profit, use the money to feed into the pension fund, take no tax from the post office for 20 years, a mandate to never sell it, have young folk do training for the post service.

    DO not employ any expensive consultants or give out contracts to anyone bar small businesses in this country

    Get some cash from Her Royal Maj, its her mail isnt it ? we have paid pots of money to them, time for some payback

    Sounds too simple , but simple things first, the meek shall inherit etc etc,

  • Comment number 5.

    The UK is pretty well stuffed at every level. The only answer will be to inflict reality on those people expecting a nice pension - it won't happen.

    Sooner or later the UK govt will not be allowed to borrow any more money and at that point it's time to get used to a much, much lower standard of living.

  • Comment number 6.

    Interesting that today's post on the soon-to-be? privatised Post Office follows yesterday's one on the troubled privatised BAA. Doesn't seem like a good answer does it?

  • Comment number 7.

    I am sorry to say they my as well sell it, the U.K government is bankrupt, the U.K have sold everything else for a quick buck, they my as well see if they can get something for it.

    What next The contents of the Museums - Paintings in the Tate Buckingham Palace

  • Comment number 8.

    Should not the Post Office/Royal Mail be turned into a bank plc and then be amalgamated with the other 'Royal' Bank ? ( We could drop 'Scotland' from any new name).

  • Comment number 9.

    Yes, the post office is probably inefficient compared to the likes of RBS and HBOS, bur surely its services reach far wider and deeper into the community to treat it equally as we have done with RBS and HBOS. What we need is investment, without the greed of executives creaming things off from little change - what have the likes of former chiefs from other widespread backgrounds as football and food retail contributed? Culturally the unions set up will make it hard to change things, but like with American car worker unions, surely its better to have a job than not - unsustainable business deals shouldn't be encouraged by the unions. Isn't this just greed on a smaller scale?

  • Comment number 10.

    The root cause of RMs problems is the pension fund. Everything else is marginal. And the reason the pension fund is a problem is its public sector heritage (final salary scheme, etc).

    Now think about the RMs pension problem magnified many times over in the current public sector. Doesn't bear thinking about does it?

  • Comment number 11.

    It would be very silly to try privatising what is still an important Public Service.

    It is another cannot be allowed to fail Service.

    Any Private Bidders would expect all risks and liabilities to be covered by the Taxpayer.

    So, unless the Gov't wish to unjustly enrich a friend or two of theirs, there is no point to privatising the Royal Mail.

    All in all a ridiculous idea!

  • Comment number 12.

    Our Master Mandelson said it was going to get sold WHATEVER and what Mandelson says, puppet Brown does.
    The real reason for selling is this useless Government cannot run anything and the only way they can solve a problem is by killing it off.

    Total shambles and it will be a loss of a great service, if not a profitable one, for no good reason. I am a conservative voter (not sure about that now with Camerooon in charge) but I still believe we need core services and utilities owned and WELL managed by the Country.
    But we will have nothing left in Britain unless we rid ourselves of the walking zombie Brown before he does any more damage. WHERE are our elected MP,s Will they ever be forgiven for allowing the terminal decline of a once great country, are they such abject Cowards that they cannot stand up for themselves and against the likes of Brown and his Master, Mandelson !

  • Comment number 13.

    #10 brian_ne37

    I agree. If the rest of the public sector bodies each had a pension fund set up explicitly and transparently, firstly the financial implications would be horrendous causing HMG to lose its AAA Credit satatus in very short order and secondly there would be a huge incentive to privatise these public sector bodies too!

    So the question is: why does Royal Mail have a pension fund set up to explicitly cover its pension obligations and the rest of the public sector does not? I think that the likes of the IMF will be asking such questions as well.

  • Comment number 14.

    The Royal Mail should be classed as an essential service and kept Govt-owned. The pension deficit should be taken in hand by the Govt and relieve RM of the annual costs associated with it.
    It is a Govt-owned company effectively, and any kind of privatisation isn't going to work, especially as more and more communications are electronic. The arrangement whereby RM deliver mail that is handled by other private companies such as TNT also needs to be revised or stopped.
    There also needs to be a step change in the attitudes of Post office staff. There are plenty that we would commend for their cheerful service, but there are also plenty that we see that put us off using the Post Office at all.

  • Comment number 15.

    If UK Mail and its like were charged above cost for Royal Mail to deliver the last mile from the local sorting office to the door then perhaps Royal Mail will turn around.

    UK Mail know exactly what Royal Mail can bid when bidding for large scale deliverys (as its fixed and published by the regulator), and they pay between 1 and 2p below cost for their letters to be delivered to the door by Royal Mail. In fact all they really do is pick up bags of presorted letters and deliver them to the relivant local sorting offices. This is why UK Mail had a 30.2% rise in profit last year and double digit rises for the previous years.

    If UK mail were charged 3 or 4p more for the final stage per letter then royal mail might not lose money of each and every utility bill / bank / card statement delivered.

    We have the cheapest mail in the EU and a very good next day near universal service.

    But we have a regulator/goverment determend to drive it down the pan, one minister stated that there never was a second post, the current minister said that rural deliveries could be on alternat days as most people would not be effected (tell that to over 70% of small home run businesses). But then the current minister is often away in london during the week so he would be happy with a onece a week service (now think how much that would save).

  • Comment number 16.

    A company that is going down tube yet they are still pumping in 15% of its staff salary into a final salary scheme ? I think it says it all about Labour and its inabilities to make the right decisions where unions are involved. If the NHS ,local authorities etc were in a competitive environment were in a open market business they would all be bust too. The final salary expectation of the public sector is simply unsustainable and will disappear in the years to come.

  • Comment number 17.

    The real problem with the post office, apart from political meddling, is that the management is awful, and I mean all layers of management. No-one really cares about service and the whole organisation is in thrall to the union in the way that other industries were in the 70's. being on a country round, with the same postman for years, we hear of the convolutions to his delivery routes, which now mean that local businesses get their mail late. Sometimes you get lots, sometimes none, apparently at the whim of the sorting office. A full privatisation with service undertakings and the government assuming the pension liabilities, or most of them, is what is required. It has been done successfully in other European countries,, and the postal services have flourished, and are major competitors in some areas in the UK.
    The only other option is to sack all the management and start again, or at least threaten to - a bit the way the US did with air traffic controllers some years ago.

  • Comment number 18.

    Just a thought Robert, next time you see Gordan, can you point out that we have some very unique antique jewellery in the Tower of London he could sell if his hard up for cash. That is if he hasn't already taken it down to the local porn brokers? It only gets used every now and a gain and as his planning never to leave number 10 we will not need it any time soon.

  • Comment number 19.

    Good thoughts, Robert.
    "New Labour is being buried by Old Labour".
    Perhaps we're better off with endless strikes than out-of-control, worshipped, bankers.
    But re Royal Mail...it is just another casualty in unstoppable march of the internet.
    That is, until the "old Labour" electricity supply unions and telecoms unions go on strike....then what happens?
    Do you remember the Dot-com share boom that went spectacularily bust?
    Well, they were right, but about 20 years too soon.

  • Comment number 20.

    Just to remind you, Royal Mail is in a frightful state.
    It needs hundreds of millions of pounds of investment

    Well couldnt you say the same about our beloved banks, but say they needed BILLIONS of pounds and to say they are frightful is a vast understatement - yet the get the special treatment, I wonder why ?

    Also as you mention , in the current economic climate the bits that are to be flogged off are going to be done at a chepo price, so we are not really going to get value for money.

  • Comment number 21.

    The post office is still the best delivery service for items under 2kg in weight for all the internet shopping businesses, the maajor problem is that the have been hang stringed by the regulator fixing and publishing the price they can charge those bussinesses.

    The number of parcels being delivered in the uk is going UK but the regulator will not allow royal mail to compete in that area. It will be interesting if TNT or who ever take over the post office if the regulations will stay or be applied to both companies!

    Look forward to the 80p to £1.00 stamp for a letter (like in Germany, Holand and France)

  • Comment number 22.

    You say "The Tory leader and shadow chancellor rather like the idea that at least part of the serious financial risk associated with Royal Mail would be laid off to an outside investor." Since when has the private sector shouldered public sector risk without exacting the most enormous cost. Their whole existence is to avoid or displace risk. It is this fundamental misunderstanding that has lead to nearly every problem of privatisation. The Royal Mail is in a declining business and an orderly management of this downsizing through the use of technology and redeployment is what is what is called for. Yes sack the current senior management in favour of those able to commit to public service ideals. PS the Royal Mail did not abolish the second post in our area - they abolished the first post instead!

  • Comment number 23.

    #8 Exactly if the post office and nationalised banks are combined there must be cost savings in staff, there will be one of the greatest local networks and an opportunity for the postoffice to become even more of the centre of the community. If that isnt enough how about being able to order library books for delivery. Without the post office most on line retailers would strugle as they offer the most reliable cost effective option for delivery of small packages - I know I used to work for one and the others couldnt cope at busy times. Dispite recent changes it is still a good service.

    Strange how politicians see fit to bail out the banks yet are so unwilling to do so with the post office, whose main problem is the pension fund, which is of the governments making.Guess the non exec directorships are not as attractive at the post office!

    Finally have you looked at teh proportion of your council tax that gose in to pension fund? Who ever is next in govenrment will simply have to address the final salary schemes of government - now that really will be a hot potato!

  • Comment number 24.

    Who says Royal Mail's sorting offices need huge investment for modernisation? Who says they need modernisation? From these "archaic sorting offices" we are delivered a Mail service that must be the finest in the world.
    I live in overcrowded Central London and the Royal Mail's courteous and efficient daily service is unbeatable.
    Independent Courier services just don't stack up.
    A re-invigorated Labour is just what we need at this time. For too long we have suffered under a
    Labour Government that is a Tory Government in disguise, always ready to sacrifice the well-being of its electorate on the high altar of Investment and Profit.



  • Comment number 25.

    The key issues with Royal Mail are all too easy to overlook;

    1. It simply employs too many people/more than are necessary. There are whole levels of management, particularly with the Post Office who simply have no role- positions could/should be consolidated.

    2. Pension liabilities- unbelievably toxic and huge, inevitable that the taxman will pick up the tap.

    3. Astronomical customer expectations- it never ceases to amaze me how we all seem to feel we have a god given right to send a letter without it even remotely threatening a £1 coin. You can't even buy a can of coke for the price of a first class stamp anymore, yet we all grumble at the first sign of an increase.

    As far as i'm aware we have amongst the cheapest postal service in Europe if not the world, and also one of the quickest though not without fault I accept.

    Why are we not prepared to pay more to use it?!

    This seems an unusual case in a deflationary environment but there is surely a case for their charging more.

    And guess what will happen if part privatisation happens?!

    1. Job losses,
    2. Price increases,
    3. Lower customer expectations.

    But on the more positive side there will also probably be further investment.

    I think we all need a dose of reality- Royal Mail is a business and should be allowed to operate as such, even if it is a national institution. The government needs to stop sitting on the fence. Take painful decisions and plough money into it, or allow someone else to do so.

  • Comment number 26.

    #20. At 08:21am on 06 May 2009, cmanwaring wrote:
    Just to remind you, Royal Mail is in a frightful state.
    It needs hundreds of millions of pounds of investment

    mmmm Other than its pension what investment does it really need?

    Over the last years it has made a profit on delivering letters (despite having the lowest stamp price in the UK and subsidising UK Mail and its like by losing on delivering their letters to the door).

    Post Office Counters has lost money but then the goverment has removed services like the TV licencing / pensions books / and Car Tax is being encouraged to be ordered on line. Even the new ID cards will be processed in shops like Boots and WHSmiths and not the post office. But its biggest losses have been the 5 failed IT systems that have been started / abandoned or had massive cost over runs. All 5 systems were forced on it by the goverment!

    Yes it could save money by investing in newer sorting equipment BUT it does not need to to make a profit. What it needs is a goverment and regulator to beleive in it and support it.

    As for the pension if its sold the pension will be transfered to the tax payer to rescue.

  • Comment number 27.

    Robert,

    The Royal Mail is symptomatic of this government, but if it fails how are the IR going to send me my Income Tax fine, or my granny send me a £1 on my birthday?

    I would also have to find another method of sending a bath plug to my MP

    I would have to go into my bank to pick up my statements, and they'd have to provide access

    Works for me. Let it go, as a lasting legacy to the Labour Party

    If it does fail the government will still leave us with the pension bill

    I think the Conservatives and Lib Dems should Abstain on the vote and even with the rebels the Labour government should still get it through the house. Then it is entirely the Labour Party's fault. It does nothing for the Royal Mail, but then the previous 12 years has done nothing either

  • Comment number 28.

    To No 4 romeplebian

    Thank you Tribune for your excellent and detailed plan of action. If those in authority over us had the
    good sense to put it into effect it might be more than royal Mail that is saved from extinction.

  • Comment number 29.

    You say "The Tory leader and shadow chancellor rather like the idea that at least part of the serious financial risk associated with Royal Mail would be laid off to an outside investor." Since when has the private sector shouldered public sector risk without exacting the most enormous cost. Their whole existence is to avoid or displace risk. It is this fundamental misunderstanding that has lead to nearly every problem of privatisation. The Royal Mail is in a declining business and an orderly management of this downsizing through the use of technology and redeployment is what is called for. Yes sack the current senior management in favour of those able to commit to public service ideals. PS the Royal Mail did not abolish the second post in our area - they abolished the first post instead!

  • Comment number 30.

    Virtually all Final Salary Schemes for companies are now ceased for new starters. Plus, employers are stopping any further contributions to the pot, and urging long serving employees to take up stakeholder pensions instead. And the Trade Unions for Royal Mail could hardly call this unfair when this is happening to everyone else, because no doubt they will be unhappy. This should help steer their pension problem in the right direction.

    Secondly, oh I'd wish there was some easy way of getting rid of Royal Mail employees who manage to lose items of post.

  • Comment number 31.

    The post office decline is all part of internet revolution, delivering goods brought on eBay is about the only thing that has kept it going this long.
    The Luddite union spokesperson yesterday sounded like a dinosaur from another era.







  • Comment number 32.

    Another total economic shambles by the looks of it.

    Can we assume that over the years, instead of re-investing earnings in the Royal Mail business to maintain its international competitiveness, this Government (and others before it?) have simply milked Royal Mail as a nice little earner? And now ... guess what ... the taxpayer will be picking up the tab for yet another piece in the jigsaw displaying that familiar picture of unsustainable state-funded pensions.

    Yet another bedraggled chicken comes home to roost, with many, many more to come yet, I'm sure. Our political elite (ha!) are a disaster and it's difficult to see the UK recovering from decades of political incompetence, any time soon.

    We need a general election now, if only to clean out the cupboard and enjoy the pyschological lift of a fresh start. Gordon Brown has been the architect and helmsman of the most spectacular decline in the fortunes of the United Kingdom since Pontius was a pilot; the sooner Brown gets his comuppance, the better. Tragic really.

  • Comment number 33.

    "Just to remind you, Royal Mail is in a frightful state"

    - Yes, thank you for reminding us Robert - now can we remind ourselves of how it got into that state?

    Years of under-investment by successive Governments so they can simply now state that "It's in such a bad way we will have to privatise it" - just like all the other un-successful privatisations we have seen.

    When will these idiots learn to think through the cosequences of their self-interested actions?

    In this current recession, your local shop might go bust, you might have to travel further to get certain items - but at least you can get health care, education and other essential services. If the thirst for privatisation continues then we won't have this re-assurance in the future, it won't just be our business going bust, it will be our schools, our hosptials, our postal service.

    The Governments anti-monopoly policy directly conflicts with the long term safety of the provision essential services (there won't be any hospitals too big to fail in the future).

    I do hope they (and the people of this country) know what their getting into.

    If anyone can name a single privatisation that has not unfairly impacted consumers or hasn't made a stable industry much less stable, or one that actually cost the Government less - I shall be interested to hear.

    How do the Government get away with it - how much longer before we rid ourselves of the parasitic leeches of Parliment?

  • Comment number 34.

    Self evidently the problems with Royal Mail have been caused by the Govt's fascination with the idea of competition. Allowing other companies (especially foreign ones) to compete with RM made it inevitable that it's business got smaller and that its flexibility to do other things would be reduced.

    We do it everytime in the UK ... Whether its Royal Mail, British Telecom or the BBC we create competition and reduce standards across the piece so that everyone looses. Instead, we should have maintained those monopolies but regulated the tits off them.

  • Comment number 35.

    Just to clarify the 'efficiency' argument.

    - of course there are efficiency savings that could be made at RM - as there are at any large business, the problem is that nobody is tasked with finding them.
    A privatised RM will do a number of things

    1) Lay off excess staff, encourage early retirement etc.
    2) Re-draw the remaining workers contracts so they work more hours for less money (called "target driven pay restructure")
    3) Sell off any assets they can make a fast buck on
    4) Increase the cost of postage.

    The company which takes over Royal mail will be applauded for turning it round and making it a roaring success.

    However, all they have done is moved the costs to the taxpayer around a bit. If you accept that currently we're funding all the wages at RM - some of which are neccessary and some are not, what happens to the money is as follows:

    1) The laid off workers (who are likely to have worked at RM for a long period) will struggle to get new work or retrained and will probably end up sitting on the dole. The earliy retirement lot will cost the Goverment in either a state pension, or a bail out of the final salary pension (which I'm sure will be the sweetener for the deal)

    2)The lower paid workers that remain will be eligible for benefits (like family tax credit) and the cut in their wages will be 'topped up' at the taxpayers expense.

    3)Any excess profit from selling assets will be lost by the taxpayer (as they will be undervalued in the sale - assets always are because they're only 'potential' profits)

    4)The cost of postage will be an immediate hit for the taxpayer. In personal mail and the increased costs being passed on by all business using the Royal mail.

    The whole thing is a false Economy -
    they win - YOU PAY
    you win - YOU PAY

    The ONLY way to make the RM efficient is for it to remain in public hands, to receive the investment it needs to increase it's efficiency and to be allowed to utilise it's monopolistic position for the advantage of the consumer.

  • Comment number 36.

    #34 wee Scamp

    "but regulated the tits off them"

    How did you get away with that?

    Are you implying all monopolies are female?

  • Comment number 37.

    It is very importnt to Brown/Madleson to do the Post Office sell-off.

    Firstly, they cannot dump it into private hands all at once. Nobody would accept that - so it must be done in stages. Once the first bit has been done, allowing a 3rd party to increase their %age will be very easy and probably hardly be noticed. It is the inital partial sell-off. Thus this is only "Phase I".

    As to selling it off when the market is at a low - Broen et al. have no concept of selling on a high/low market. They just do not appreciate such things and have no interest in getting the best value for public assets. To them it does not come out of their pocket and is fast forgotten so "why worry"

    Selling off part does not address the structural changes going on in the market place (e-mail, downloads vs physical media, etc.). The solution will not address the cause of the problems. It will allow a competitor to take over a portion of a declinine market (along the lines of "eliminate competition") but does not address the Post Offices declining market.

    It does nothing to address the pension fund problems. In practice, no private partner is going to take on such liabilities so again it will come down to the tax payer to hand out more money - effectively giving away the organisation (or even subsidising whoever takes it over).

    Certain job losses will probably help slightly reduce the pension fund problems but I doubt it will have much impact.

    (I appreciate it is not a "take-over at the moment but it will happen).

  • Comment number 38.

    It's like we used to say when I worked for the NHS - are you overspent or underfunded?Is the Royal Mail losing money,or does it not get enough money to perform the tasks it is asked to do which can be made profitable,as well as those tasks which can never be made profitable but are socially useful?Like postbuses in the Highlands or rural post offices across the UK.
    I can't remember if it is Sweden or Denmark that is obliged in law by it's government to deliver post to anywhere in the country by the next morning.Both being comparatively small populations spread over wide areas,like the UK,subsidies have to be paid to continue these kind of services which,I imagine,still need to be run efficiently.
    So in the end,like a lot of political issues,it comes down to knowing the cost of something against the value of it and legislating accordingly.

  • Comment number 39.

    Communities and communal trust are what the country desperately needs, and what Gordon Brown, Jacqui Smith et al have spectacularly managed to undermine.

    The way in which the Post Office has been treated over the past decade is abysmal. Shame on NuLab.

  • Comment number 40.

    The GPO belongs to the age of steam and is evidence that union dominated and nationalised public services will continue to fail because of collective resistance to change and politically motivated incompetence.

    Sell, take a loss, move on, the private sector are better deliverers already in urban areas, develop logistics to serve rural areas equally well, end of problem except for the political blame game.

  • Comment number 41.

    @wee-scamp makes the important point that we could be in the money by regulating 'the tits' off monopolies we could've maintained... but ruined competition. It's good that RM is in a bad state, it proves how poorly they've been run. With no competition, RM allowed it's standards to sink, and needs to buck up its ideas before getting more money pumped into it.

  • Comment number 42.

    What's in it for the private investors who, I assume, will invest with an eye on good future returns.

    Over the years, did the "government" deliberately let the Post Office run down and builtup pension liabilities, so that excuses can be made for selling the Post Office ?

    What's in it for lobbyists ?

  • Comment number 43.

    it should be no surprise to anyone that the Royal Mail is in a mess. It is a microcosm of all that is wrong with the UK; neglected, suffering from severe under-investment, a management only interested in filling its pockets, poor workforce morale, a shrinking market-place and severely over-borrowed in the medium term.

    Yet do we see Gordon and his pals arguing that the British government should be sold off to a third party? If they are right about the Royal Mail then logically this is the solution for government as well.

    The Germans showed an interest in a takeover in 1940 and I just wonder if they could be induced to make a new offer. This might be better than the Taliban as they would pull down the schools and make Harriet Harman do the washing up; neither of which would do at all.

  • Comment number 44.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 45.

    The Royal Mail issue is a complete farce.

    The ONLY problem with Royal Mails profitability is price.
    It is forced to charge prices that are totally unrealistic and far far below what ANY other carrier would & does charge for basic letters & basic small packages.

    The parts of Royal Mail that are unprofitable are being deviously and negligently abused & are allowed to subsidise TNT & other carriers who charge greater amounts for these services & then use Royal Mail to deliver these particular packages/letters.

    Tesco & most food shops have loss leaders, but they will NOT allow Asda or Sainsbury's or other retailers to come into their shops & en-mass purchase their loss leaders to then resell at higher prices, creating substantial loss for Tesco etc.
    Yet this is the situation with Royal Mail.

    The thing is, is that to use TNT PremierSort (3 Day)service, you have to send a minimum of 10,000 items, & just LOOK at TNTs service which is SUBSIDISED by Royal Mail & when Royal Mail receives taxpayers money, it is actually being used to subsidise TNT & other postal carriers.

    TNT Injected into Royal Mail UK network 3 days after collection

    What Happens to my mail?
    Day 0
    Unsorted mail collected from you
    Mail delivered to TNT Post sortation centres
    Day 1
    Mail machine sorted
    Day 2
    Bags of sorted mail delivered to Royal Mail
    Bags are signed fro by Royal Mail
    Royal Mail local sortation
    Day 3
    Delivered by Royal Mail

    Royal Mail are FORCED to do the dirty work for MANY carriers BY GOVERNMENT & then government & meddlesome Mandleson has the cheek & audacity to be negative about Royal Mail & say it is not working properly or profitable enough.

    Theres NOTHING wrong with Royal Mail. The SOLE problem is political interference & deceit which forces Royal Mail into bad situations.

    If Royal Mail is privatised, the consequence would enevitably be higher overall prices. It is forced LOW prices and operational restrictions that is making it hard for Royal Mail to compete with private companies.

    NO other carrier would or could deliver a 100g package to ANYWHERE in UK for a minimal £1.08 2nd class or £1.28 1st class, not unless they used Royal Mail to deliver 10,000 or other large quantities at a time.

    This government has picked up from the previous Tory government. If you want to sell off nationalised industry, just ensure it is badly run & force it to look bad by restricting income & causing employee disruption.

    Even part privatisation of Royal Mail will heavily line many pockets & you do not have to have direct links or shares to benefit, there are much more cagey & complex ways that money & benefits from sell offs are passed around, which are legal, just as MPs expenses are mainly legal.

  • Comment number 46.

    This shows once again the total inability of the public sector to run and manage any type of large organisation.

    I have spent the last 18 years working within, supplying to and educating the NHS. Without doubt, the level of ineptitude at all management levels has to be seen and witnessed at close hand to be believed.

    I even had a Chief Executive ask me during dinner to review a £1.8m contract because they were unsure what level of service they would get!

    I would assume that the same attitude and culture prevails within the Post Office. My wife has a friend who is a "postie". She starts at 07.00 and is finished for the day by 2.00pm, has every 5th week off and constantly complains about pay, working hours and conditions, her "unreasonable" new boss who asks her to "do" other things.

    I would suggest that working a 7 hour day and getting every 5th week off would be welcome to most people reading this blog. The problem is culture.

    Hopefully, as this current downturn forces the country to look inwardly at exactly where the money is draining away the realisation will set in and the necessary changes will take place over time. As M&S say, there is no plan B.

    The public sector do not need any more money, they need to use what they have in the same way any well run commercial entity should & do (and there are many in this country). Stop the waste, stop the idiot managers ruining the country.

    Let's all stop making "paper" money and start making, creating, building and selling things in a proper, profitable way and then the markets WILL sort out the strong from the weak.

  • Comment number 47.

    9Bln? that's peanuts, print it up Gordo - You know you want to!

  • Comment number 48.

    Why are Labour taking this on?

    Selling assets right now smacks of a fire sale. And with the pension fund, like all pension funds, in the doldrums partly cyclically as in any recession, the price will reflect that too.

    In a financial crisis, they should concentrate on productivity improvements - the environment for that has never been better.

    Besides, the election has to be held by June next year. Does Labour not have other priorities?

  • Comment number 49.

    Ever since the news about the get together of Old Money, a Tycoon, a Lord and shadow Treasurer on a Greek Island, I have started to wonder whether most of what the government do and don't do is for the interests of the super rich, tycoons and lobbyists who can offer some rewards to those involveds, now or in the future ... It could explain many puzzling things over the past decades ...

  • Comment number 50.

    Robert,

    Royal Mail has been in a frightful state for years. Lord Sawyer, Patricia Hewitt, Allan Leighton produced a complete restructuring plan in 2001/02 to rescue an outdated strike-ridden monolith to stem its haemorraging of public money.Vast losses were being made with delivery services under pressure from fax, email and other forms of private delivery. Why is it that Consignia restructuring has failed. Who is responsible - management, unions, governing department? Your post could well have mirrored similar articles in 2002 !

  • Comment number 51.

    The whole issue of the part privatisation of the Royal Mail is a dreadful reflection on the state of our country and the feebleness of our government institutions. The Royal Mail may not have performed as well as we would have liked but its executives were appointed by this incompetent Government. To its credit, the Royal Mail has delivered the mail, not always as efficiently as we would have liked, but compared with the track record of this government they stand out as a beacon of competence and integrity.

    The government (and seemingly the opposition) want to bring in foreign participation because of it considers this would somehow revitalise the organisation? Moreover, they fear that providing further financial support from the public sector for Royal Mail would be akin to throwing good money after bad. Following this logic, we should privatise the government who have by any criteria performed less well than the Royal Mail.

    Surely it is within our competence to repair the problems prevailing within the Royal Mail and create a global leader in postal and courier services without resorting to foreign intervention? Or do we simply throw in the towel and consider ourselves second, third or fourth best? With good leadership the Royal Mail and this country will prosper and grow. Because we currently lack this, should we flog key national assets at a knock down price when asset prices are cheap? I am beyond despair!

    SJC, Shipley

  • Comment number 52.

    its called the royal mail and thus if i am correct was set up by royal charter and it is in its best interest to remain part of the countries core postal movers.
    could not the royal family step in and fund the royal mail keeping it in the public sector and not partly sold off to european companies like so many ex-british companies today.

  • Comment number 53.

    Who is exactly to blame for Royal Mails pensions problems the answer is simple and basic. Government.
    Government also does not have the money to pay for public workers pensions, it has spent the contributions & instead uses current tax/NI income to pay for them & is also now making younger generations work more years to pay for todays pensions, while at the same time when all these present young people retire they will get much less.

    Government have set the rules for generations, we have had many incompetant governments over decades, yet they try & aportion blame to non government individuals.

    Royal Mail has been controlled by government, government sets the terms & conditions, if Royal Mail is failing, then it is NOT of it's own efforts but of government incompetance.

    Royal Mail is just a reflection of the UK, if government cannot set conditions & terms to enable Royal Mail to function properly and profitably within governments remit, then this shows that government is incapable of running itself & all other aspects of our society/country & is why UK PLC is in such a bad & perilous predicament.

    I have a small business & send a few thousand parcels a year via Royal Mail (100+ per week). Royal Mails services are suited to the bigger majority of people, private carriers are suited to big business. I find Royal Mails prices to be much better than other carriers, because other carriers charge much more for a basic service based on weight & they just do not provide a true national or international service. For instance I can send a package to Turkey- Royal Mail cost £12.80, other carrier £65.00, slight difference in price, so un-elected meddlesome Mandleson please do not insult the public & say that Royal Mail is not competative.

  • Comment number 54.

    # 24. possumpam

    You raise a good point. It was antiquated sorting offices which used to get a post card across town within a few hours.

    I have a delightful old card sent by an Edinburgh office worker telling his wife that he would be home a little late for supper - sent with every confidence it would get there on time.

    Given this government's love afair with high-tech projects which come in over-priced and under-performing, i.e. their penchant for selling us a pig in a poke under the pretext that it is "modern", I'd like to see the "pressing case for modernisation" explained further.

  • Comment number 55.

    #40 Geffthereff wrote

    "Sell, take a loss, move on, the private sector are better deliverers already in urban areas, develop logistics to serve rural areas equally well"

    I don't know which urban area you live in but in mine (london) the private sector certainly isn't better at delivering mail.

    With the 'develop logistics' - do you mean a nationwide delivery system which can afford to take losses to deliver to the rural areas - a bit like a nationalised post office perhaps??

    I don't know which department of the Government you work for, but your reasons for private enterprise running the post office better have no subtance whatsoever (which is why you must work for HM Gov.)

  • Comment number 56.

    #44 brighter future

    Please stop coming on this blog and advertising your own website - no one is interested or they would be there already!

  • Comment number 57.

    Well, it's the elephant in the room syndrome, isn't it? How many more pension deficits are out there just waiting to be dumped onto the government's books?

    The government MUST privatise (part or otherwise) to rid itself of a pension deficit that would flag up the fact that the PSBR figure is now c.400% of GDP and rising and not what the ONS would have us believe. This deficit has been accrued because of daft government policy implemented by Blair and Brown.

    But the government MUSTN'T privatise (part or otherwise) because it will be electoral suicide. Policy will be cobbled together for transient gain and enduring substantive failure.

    There is also the real chance of it bringing this government down - which could well bequeath 2 remarkable events:

    a) The election of a p*** poor opposition with no policies and
    b) the complete annihilation of the Labour party as a political force for 25 years.

    Things can only get better....

  • Comment number 58.

    If Royal Mail can be profitable and well run under private management and some funding, then it should be kept in public hands because we would like to share in those profits. The logical action would be to replace the current management with private managements but leave the ownership in "Royal" hands.

    Yes, agree with the previous poster. We should formalize the privatising of government which has been in private control anyway.

  • Comment number 59.

    2. At 00:54am on 06 May 2009, GlenisDevereux wrote:
    "The rest of the time some bloke puts a pile of stuff that, if they sent it to me electronically, it would be called spam. On a good day I avoid slipping on it (they are all very glossy and slippery), I pick it up and put it in the bin. A few days later another bloke comes round and takes mine and everyone elses snail mail junk to a land fill - and this is business ?"

    We no longer put such stuff in the bin, it now goes back into a RM letter box to go around the system once more.

    I see GB and PM think there are still clowns around willing to buy our toxic assets, hey ho, lets cause another private company to come by in a year or two with its giant begging bowl held out.(just to provide a nice pension for the directors)

  • Comment number 60.

    Maybe its time to let RM get on with it. Get rid of whatever quango is regulating it (an easy start to the public services savings) and let it charge the economic rates for what it does. Competition from the other 2 carriers will allow them to evolve without all replicating each others services. How many of the RM/TNT/UKMail trucks run up and down the country, running partially full and duplicating routes?

    I suspect what would happen is that RM would be doing most of the domestic collecting and all of the domestic deliveries. The bits in between (collection, sorting, trucking and delivering to the local sorting office) would then be done by whoever was best suited to it. If this is done properly commercial customers should then get all their mail/parcels delivered and collected by 1 van. Currently I suspect they get numerous collections/deliveries by RM/TNT/DHL etc.

    RM could then start running post bus services in the highlands again, there must be some money in that, as they are running the routes anyway!

  • Comment number 61.

    #46 nice one son wrote

    "This shows once again the total inability of the public sector to run and manage any type of large organisation"

    ...and on what basis to you come to that conclusion? Maybe the benchmark is the well run privatised trains, or maybe the well run telecoms business, or the well run water and other utility companies.

    Unless you mean that well run is a euthamism for - rip off the public - I don't know how you can make such a statement.

    You only THINK it's badly run because you still believe the tripe the Government and private sector spout out on a frequent basis.

    Maybe I've got it all wrong - maybe the public won't be happy until the RM is run privately and the exec's are sailing their yachts in Monaco whilst we are paying £1 to deliver a letter.

    The lack of insight by some people is flabberghasting.

  • Comment number 62.

    There seem to be lots of Government lobbyists on ths post. No one from the REAL public wants Royal mail privatised.

    Don't worry civil servants - your time will come soon...

  • Comment number 63.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 64.

    Perhaps if Royal Mail was allowed to raise its prices significantly, then the remaining refuseniks would (belatedly) move over to email. All that is needed for this to happen is for the law to recognise digital signatures (and I mean proper ones with SSL or OpenPGP signing certificates, not ticking an 'I agree' box) as being just as valid as an ink signature on a posted or faxed document. Then we will only need delivery companies (even monopoly ones) for transporting goods, such as online shopping purchases.

  • Comment number 65.

    Robert,

    Please dig a little deeper and don't just regurgitate the lies and half-truths coming from Peter Mandelson.

    It's true that letter post is in long term decline, but is the total volume of mail declining? Not if I judge by my own experience. In any case, if it is declining, it is doing so after many years of steady increase. And parts of the business, such as small packets and parcels, are expanding rapidly, thanks to Amazon, ebay, etc. So it is clear that although the postal market is changing, it's not going to disappear this side of the second coming.

    As others have said, the real issue that Peter Mandelson is unwilling to confront is the fact that the Royal Mail is being forced to subsidize the bulk mail carriers like TNT.

    Turning to the pension: It's true that there is a large funding deficit, but the deficit is not that large in relation to the size of the assets and liabilities. For a public sector pension scheme, the GPO pension is actually in pretty good shape. But my understanding is that the proposal is that the government will grab the pension fund assets, and replace them with an IOU for the whole of the liabilities. On the principle of 'follow the money', it is this that seems like the real reason for the privatisation. In a few years time, the postmen will find that the IOU will turn out to be worth rather less than face value, as will other groups with unfunded public sector pensions.

    Finally, a universal postal service and local post offices are part the fabric that binds us together. Remove those and it diminishes everyone's quality of life, making us slightly less of a nation and more a collection of unhappy individuals who just happen to work and sleep in the same island.

  • Comment number 66.

    ..and on what basis to you come to that conclusion? Maybe the benchmark is the well run privatised trains, or maybe the well run telecoms business, or the well run water and other utility companies.

    --------------------------------------------------------------------------------

    Did you actually read my post?

    There's a small part which reads thus - " have spent the last 18 years working within, supplying to and educating the NHS"

    Which part of that statement did you not understand?

    Part of that 18 years has been spent as an outside consultant assisting PCT's and the like on how to MANAGE the organisation. In addition, I am a qualified clinician who currently spends around 20 hours a week teaching "best practice" in hospitals all over the country.

    Now, explain to me and the rest what it is you don't understand?

  • Comment number 67.

    #46 Nice One Son

    I suppose you think that banks are well run too. When I first started working with large corporate organisations I thought they must be well run to make the money they seemed to make. How wrong could I be. 12 m oths of visiting Oil companies, telcoms companies, banks etc showed me the error of my assumptions. They were just as badly run as anything else including PO, Health etc. I once spent an entire day in the head quarters of one of the countries largest Oil companies without hearing the word or any reference to oil products. The difference between those who seem to make vast profits (called sucessful) and other large organizations is that the sucessful ones have a license to print money, not that they are well run. Some of the licenses subsequently got revoked (Telecoms and more recently Banks). Watch the next few years the Oil boys are about to lose their license. So dont be too hard on the dear old PO, their license has been slipping away for years as a result of changes in communications and cost providing the service. I doubt if their managers are are any worse that any others.

  • Comment number 68.

    The presumption that you make is that the Royal Mail needs to make a profit. The Royal Mail certainly needs to break even to finance continued existence, but that does not necessarily require a profit. Private investors are committed to profit on principle and view all publically owned organisations with a suspicion rooted in freedom from profit.

    The Post Office, when it began, was essentially a radical consolidation of the carrier market. it make posting items safer, more secure, more predictable and more reliable. Market liberalisation reverses that because of the ideological commitment to profit.

    Reviewing the "data losses" over the last year or so begs the question of how many data losses were due to private carriers. Not simply as an ideological gesture but as a serious challenge to the notion that Public Ownership means inept management. Why fragment the postal carrier market in favour of profit if all it does is causes carried items to be lost, delayed or delivered less predictably. These are all experiences resulting from before Rowland Hills Penny Post that are being reproduced by the current pursuit of profit.

    There are things that the Post Office could do. The Post Office innovated magnificently in developing Computing Machines during the Second World War. Similarly, British Telecom owes its entire existence to the Post Office. Both relied on commercially difficult challenges. Challenges that private businesses have never been capable of living up to. Challenges that did involve mistakes and false starts that would wipe out the board of directors with a profit warning.

    The whole notion of Privatisation, in whole or in part, is driven by an ideological commitment to profit. The same ideological commitment that drove banks to invent products that have recently been renamed toxic debt. The sum realised from the sale would be nominal. If the Treasury were to be a Board of Directors there would be writs of no confidence and screams from "Financial Experts" that the decision was a commercial "no brainer".

    The ideological commitment is not shared by the owners: the British Public. The idea that the Post Office is badly run can be debunked by comparing it to the Banking System: the post works, adds social capital into the economy and breaks even. The accounting exercises to manufacture a crisis do little but demonstrate the need of badly run private businesses to continually take injections of public funds in order to remain "profitable".

    The problem is not the Post Office. The problem is private businesses insisting they know best. Clearly, they do not.

  • Comment number 69.

    morning mullerites

    I had sworn off posting on this blog any more, but the whole Royal Mail part-privatisation thing makes me so angry that I can't stop myself

    It is an outrage that Labour Mandelson/Brown would do this; the Royal Mail has been crippled by govt neglect and negligence; tell the regulator to let them charge a sensible price for a stamp!

    I can only pray that the 100+ Labour backbencher creeps vote against this and don't backslide like they did over the invasion of Iraq; there is no point in having a right-wing Labour party; let the Tories have a go (they will deeply regret being in govt for the next few years) and try to build a new centre-left party without the Blairites, Brownites, Mandelsonites etc etc

    As for Peston and his whole false presentation of 'they could do this or that blah blah blah' I also have complete contempt; go talk to your Labour peer daddy about it and your friends in govt

    If this appalling govt is willing to contemplate the privatisation or bankruptcy of the Royal Mail then it truly reflects their utter failure to do right by the UK; can you imagine the US govt allowing the US postal service to get into this situation?

    As for TNT, as many others say here, they will quickly get the rules changed to charge triple or whatever; but if things go wrong they will simply threaten to walk away, like the train operating companies etc

    Yet again the potential profits are privatised and the losses/risk remain firmly in the name of the taxpayer

    Only 4 days now until I'm off to Canada and I will not be sad to leave the UK in its current state

  • Comment number 70.

    The problem with all this is the idea that it is a transfer of risk to the private sector. The newly privatised mail will presumably be covered by the same "too big to fail" clause as the banks. In this case because the idea of not having a regular, inexpensive postal service covering the whole of the UK is unthinkable.
    In the short term the Government raises a bit of cash, and the new owners cut staff and investment in order to rake in short term profits. A few years down the line the Royal Mail will be in a bigger mess and it will fall to the taxpayer to bail it out.

  • Comment number 71.

    I hear that someone has nicked David Cameron's bike

    Or as NewLabour would say, it has been 'part-privatised'

    It wasn't me honest; I only nick stuff on the high seas

    Cheered me up though!

  • Comment number 72.

    To summarise:
    The government, because they cannot think of anything better and need some cash, want to sell a piece of something, Royal Mail, that apparently only an indiot would want to buy .
    Royal Mail occupy themselves delivering 80 % waste paper, which the government criticises us for subsequently throwing away.
    To save up, the Post Office is closing all its small offices so we have to drive miles to be criticised by the government for using our cars and destroying the environment.
    But just over the horizon, there is the cavalry, the white knights, TNT, the organisation that turned the excellent Dutch Postal Service into a disgrace.
    What we need is psychiatric help, not economic advice!

  • Comment number 73.

    Interesting that Brown & Mandelson seem to believe the public want and need a "first class" postal service on the one hand, which is a good idea. Yet, on the other we can't have it, because doing this will provide their opponents with too much adverse political ammunition.

    So what matters first and foremost is not a credible efficient and up-to-date postal service, but whether or not the backsides of the great and good have been soothingly covered? This really goes to the heart of Britain's leadership crisis. How about doing the right thing, for once, rather than taking fright at what the tabloids might print?

    If anyone wants to know what has been and remains wrong, with Britain and our frequent bad management and appalling approach to things, (esp. Terminal 5,) this is it, in all its glory.

    Sure the pension cost cannot be provided and it is quite disgraceful that it cannot. But it's a question of how those people affected are going to be provided for. I think they should be told the whole truth about how it has happened, they deserve nothing else (which won't happen - see previous paragraph)and what can be done to alleviate their problem. Sadly, but predictably, those at the top find "doing honesty" a real problem and it is that which is the real cost, i.e weak leadership, in the end.

    Yet how come other Western countries can provide a postal service and we can't, is it just bad management and poor political leadership, at which Britain is bottom of the class? I think it must be! Because whenever the word "industrial" is used in a British context, it always seems to be followed by the word "decline."

    So what do we do? Keep passing all our work over to China and India for them to do for us? Seems no one at the top is convincingly prepared to question this business mentality. Britain needs better.

  • Comment number 74.

    #35 - There won't be any need to cut sorting jobs, at least not until the sorting offices are made more efficient. Like many UK companies, private and public sector, Royal Mail probably has far too many managers. Making managers redundant would put less stress on the benefits system than the ordinary joe.

    However, for all staff RM need to up the ante with regards to performance. Still too many items of mail are late, lost or damaged and RM could do without the so many claims for compensation that it receives.

  • Comment number 75.

    A lot of fairly daft criticism of 'goverment' on this topic. Normal mail is suffering because the world has moved on, not because of 'politics', 'bad management' or anything else. People communicate faster, more efficiently, for free.

    If people want to pay a premium for the 'nostalgia' of a written letter then they can. Personally, I will send an e-mail, text message, use a Social networking site. Sometimes things become redundant - Royal Mail is an example, and if it cannot make a profit as a private enterprise then why bother funding it with taxpayers' money?

  • Comment number 76.

    At 08:07am on 06 May 2009, hughesz wrote:
    "A company that is going down tube yet they are still pumping in 15% of its staff salary into a final salary scheme ?"
    I think you'll find that the staff are putting 15% of their salary into the pension scheme. Stop the pension scheme and the staff wages will have to go up 15%. This will save nothing and put more strain on the scheme paying out to existing pensioners with no further money coming in.

  • Comment number 77.

    The cost of delivering letters is far too high ,they should be rolled into tubes then mounted on arrows and shot through letterboxes by the unemployed from moving open backed trucks in exchange for bennefits.

    After 3 years work with the royal mail ,those still unemployable should be dropped by parrashute onto the tora bora mountains armed only with bows and arrows and a picture of Osama with a letterbox covering his forehead.

  • Comment number 78.

    As an ex-employee of Royal Mail who has ctually been happy with Adam Cozier's changes i think it is time that the CWU and the political figures against privatisation put forward their OWN suggestions for the future of Royal Mail. For a start how do you deal with the estimated £8-£9 billion pension defict without another taxpayer bailout?

    To simply dismiss every suggestion out of hand but offer no alternatives is not going to get anyone anywhere. Putting your head in the sand for future generations to worry about should not be an option.

    Oh and no #10 - the Royal Mail deficit, while large, is not that comparable to other public sector deficits. The NHS scheme alone is £200+ bn and that is before you add in Teachers, armed forces, civil service, local government etc...........we are probably looking at close to £1 trn. A hell of a bailout

  • Comment number 79.

    By what right is Mandelson selling off publicly owned assets? Who voted him into the government. This is being railroaded through by an unaccountable appointee, who had to leave the government twice for reasons of financial irregularity.

    What price democracy.

    It was a disgrace the way in which the postal market was de-regulated and the Royal Mail hamstrung, the present situation then became an inevitability. Who has gained? certainly not the public who could never use the new services, but now have extra UKmail traffic etc added to our already busy roads. Will these restrictions be lifted to favour tnt or extended to cover the rest of tnt's UK operations, i'm sure we'll see in due course and draw our own conclusions.

  • Comment number 80.

    I've read quite afew of your blogs and they are all very interesting, but there is one question I really need answering...

    ...how can the RM be in such a bad state if the Post Office is the most popular shop in the High Street?

    If ever you go to a PO, the queue is out the door it is never like this at any other 'shop' on the high street. The bookshop and Oxfam shop next to my local post office are invariably empty and the dodgy fried chicken place two doors down is only busy when the pub shuts. How can these businesses prosper and the PO be in such a state!?

    OK, I realise that the PO is only a part of the whole RM and my comparison is a bit simplistic, but I think solving business problems often comes down to answering simple, basic, fundamental questions. Alot of the problems experiencing RM must have something to do with this difference between itself and other shops and services.

    I am definitely not advocating that RM close down any PO's though, the fact that they are so popular illustrates that they are essential to local communities.


  • Comment number 81.

    34# "If anyone can name a single privatisation that has not unfairly impacted consumers or hasn't made a stable industry much less stable, or one that actually cost the Government less - I shall be interested to hear." - easy BT. Maybe you do not remember the service from BT in the 1970s. Would you be prepared to wait 6 months for a phone line, only buy BT approved phones at BT inflated prices, pay for calls abroad at several pounds per minute rather than pence per minute - oh and forget about broadband internet connections you would be lucky if we ever got 56K dial up connections by now unles you paid for the overpriced ISDN line. We have an incomparably better phone service now.

    Back to Royal Mail. It is bust. You can blame govt for the last 40 years for taking too much money off them (particularly 1970s), encouraging underfunding of pension scheme all true. Now the problem is a combination of management (too much), unions and investment. Not sure that part privitisation will help.

    What needs to happen is as follows:

    1. Royal Mail pension scheme closed to both current and existing members but govt agrees to pick up shortfall.

    2. New pension scheme set up on standard money purchase arrangements the rest of the private sector work to.

    3. Unions go on strike - give them all a week or two and then tell everyone that they have 3 days to come back to work or they are sacked. There are a couple of million unemployed so finding people to do the job will not be difficult. That should reduce staffing cheaply

    4. Get rid of half the management - as I am sure the post office workers will confirm it probably makes no difference which half.

    Then and only then put it up for sale - you might get someone to pay good money for it - right now no-one would give a penny for a company with the pension liabilities, over-staffing, union practices that it has

  • Comment number 82.

    UAW members at Chrysler in the U.S. are accepting a 50% cut in the value of their retitrement benefits.

    At the risk of upsetting the posties, could not tRoyal Mail workers be "persuaded" to follow the UAW lead?

  • Comment number 83.

    How ironic that after 11 years of a Labour government the Royal Mail is now effectively bust. Not only that but so much money has been poured into and wasted in public services yet they did not pay the pension contributions for the employees.

    So what if the potential partners are no longer interested? Do we have to borrow even more money to keep it going until we can borrow no more.

    The consequences for the rest of us who have to pay for this in the future are now being discussed openly.

    Retirement at 70? Who will be able to hold onto a job past 50 let alone 70. So what do they live on until they reach retirement?

    I really think Brown's past caring now and the more damage he can leave for the Conservatives the happier he will be.

    There again one bank less would not have been missed so if a choice has to be made let a bank go and save the Royal Mail.

    After all if this government make such a hash of the banks as they have the Post Office one less bank could save us billions in the long run.

  • Comment number 84.

    54,

    In reference to high tech projects, I feel compelled to defend the fact that technology CAN improve services. The problems often encountered in my experience are largely down to poor managers, this country has some fine engineers who can deliver (First class projects on time, every time).

    The problem is usually managements fixation with deliverables that are utterly unrealistic which contributes to stress within the engineering community which results in

    a) Poorly defined project requirements,
    b) Not enough time to develop, test and implement those poorly defined requirements.

    Again,

    The Bonus culture rears its ugly head, this time in IT.


    Managers (and I use this term very loosely) often couldnt give a FOUR X about whats delivered as long as the cash rolls in.

  • Comment number 85.

    71. At 12:50pm on 06 May 2009, somali_pirate_SP500 wrote:
    'I hear that someone has nicked David Cameron's bike'

    It was probably nicked out of the boot of his car then!

  • Comment number 86.

    if the RM had an even playing field and let them charge a market rate for delivery then they would not be in this mess

    either open them up to free markets or subsidise them it is fairly simple.

  • Comment number 87.

    A Royal Mail solution

    - Stamps 50p mminimum
    - Absolute ban on the delivery of unsolicited mail from companies/businesses to residential addresses
    - One free delivery a week
    - Businesses pay for as many deliveries they want, above the one free at cost + 10 percent.
    - Sorting offices let you know by email when you have mail or parcels to collect between deliveries.
    - etc.

    - And pay the staff properly!

    We have to bring the Royal Mail into the digital age.

  • Comment number 88.

    Just a note about the so called massive pension deficit. Has anyone actually looked at the details of how it was calculated. I am no actuary but I am a realist.

    The public sector pension I am in has an AVERAGE life expectancy for men in 20 years time of 93! Whilst I may be happy to live to such a long and venerable age I can't help thinking that this is rather optimistic.

    Recalculate the pension liabilities at a more reasonable 75-80 and the figures would look rather different. No one was interested in pension funds until FRS17 came along anyhow.

  • Comment number 89.

    All Royal Mail managers have falling asleep. They need to wake up and innovate.

    Thousands of RM vans up and down the country do about 30/70 miles a day.
    Not long ago the government announced investment in (British ?)electric vehicles. So where is the joined up thinking?
    Or is it the case that not even RM managers have faith in the government proposals.

    BTW: ''hundreds of millions of pounds'' needed for investment in new offices could be met by selling prime commercial sites and investing in more suitable new locations.

    For the delivery boys and girls, aren't there hundreds of ex-Woolworth's and other retail units available for rent??

    The sorting delivered (split) sorted.

    Pensions will be increasingly met over time,by increasing share indicies.

    P.S. How much am I owed now?

  • Comment number 90.

    I must be missing something here!

    You run a virtual monopoly, The Post Office, because thats what it is for every day post a letter at the end of your street and get it delivered the next day anywhere in the UK. Which in my eyes is a good, and required, service.

    You are not making money running a monopoly. Put the price up until you are either making money or other Companies steel the business off you at the improved margins. The state owned and run post office either makes money or shrinks in size and the service becomes privatised by stealth.

    No big political outcry. Just nature taking it course.

    Or we could do what we have done with all the other former nationalised service, water, electricity and gas. Privatise it sell it to the French and Germans and let them put the price up until they make a profit.

    As for the pension deficit stick that with all the other public sector deficit another £9 billion is a drop in the very big ocean that we are doing nothing about until its too late.

  • Comment number 91.

    69 and 71 somali-pirate-SP500

    Hello somali - glad you succumbed again to this blog - I like your posts.

    Bit dangerous out there now isn't it - they're fighting back!

    Enjoy Canada - you lucky chap!

  • Comment number 92.

    I do like the idea of "The Post Office", the "Royal Mail", Postman Pat etc.

    The only problem I have is that if you think about what it is, then why do we need it?

    Stamps can be sold by anybody, postal orders (which are horrendously expensive) can be replaced by bank or b/s counter cheques (You hand over the cash and they give you a cheque to send to whoever), Delivery of the mail can be done by any one of a number of courier firms,(out of town Boondocks persons would need to have their deliveries subsidised as at present.) any other services that they provide such as licences can be done on-line or again from Supermarket kiosks.

    Shut it down/break it up flog off whats viable whatever. We don't need it.

    I personally believe that to be able to send snail mail and get a high percentage of next day delivery for 30 odd pence is ludicrous, the price of a 1st class stamp should be at least 60p and would be a bargain at that.

  • Comment number 93.

    Brown`s right royal dilemma--TNT the Dutch company has been mentioned as a possible buyer for the Post Office. I live about a quarter of my time in Amsterdam and the rest in Yorkshire so can compare postal services on both sides of the North Sea.
    In Amsterdam most people live in appartments in which like most continental cities there are post boxes in convenient places in vestibules etc. The post albeit not arriving till the afternoon comes regularly and I receive it the next day from anywhere in the Netherlands. Post boxes are everywhere and also emptied on Sundays at least in Amsterdam.
    Post Offices are modern and as one would expect well organised . They also act as girobanks an old institution in Netherlands. The big difference is that the customer, for all postal and banking services ,is expected to use information technology , the computer, and the Dutch being business minded people add charges if one uses over the counter services as they do also for train tickets if one does not take advantage of modern communication practices.Personal service costs money!
    The Unions obviously should make strategies to negotiate with the prospective owners of the Post Office erstwhile Royal Mail. We do not have the excellent social/ financial back up that employees have in the Netherlands.
    We cannot afford to continue to have outmoded institutions-sic transit gloriae mundi-nor do postal services, if efficient, need to be run from the country where they are - the counts of Thurn and Taxis ran most of Europe`s postal services well into the 19th. century.
    Hortusbrug Yorkshire

  • Comment number 94.

    Why blame the govt for the demise of the post office-surely the fault lies with the fact that people simply do not use them. If people actually used them in the numbers that are shouting about them being closed then they simply would not be closed. Its amazing that many people are shouting about this process when probably half do not use them. The fault does not lay with the govt but with the public for either simply not using the service or not actually wanting the service and the media and those in opposition are using this process to whip up pressure on the govt for a service which is not being used. I in fact regularly use the PO, they provide an effective and efficient service but there are not enough consumers like me wanting to or either needing to use the services provided. Blame the Public not the govt!

  • Comment number 95.

    65. David_Kilpatrick wrote:

    "But my understanding is that the proposal is that the government will grab the pension fund assets, and replace them with an IOU for the whole of the liabilities."

    Following Robert Maxwell's foorsteps.

  • Comment number 96.

    If a company goes to the wall then it should be left to die in peace. There is obviously something wrong with the management if they are incapable of keeping abreast of the competition and so they deserve to go to the wall. This Government is under the impression that if you keep throwing money at lame-duck companies, banks etc then it will help them to get better. When are they going to learn that 'No!' it doesn't. Waken up and smell the coffee! They have bankrupted this country with their incessant spend, spend, spend on useless causes. Now is the time to stop - for everybody's sakes.

  • Comment number 97.

    Don't worry so much everyone. The markets are surging ahead on a wave of optimism; don't get left behind! When securitization returns there'll be plenty of bonuses to go round. Asset prices are stabilizing, more credit is available. The investment banks are very busy turning themselves into retail banks, and once they have all that lovely deposit account muellah then theres no end to the 'financial innovations' to come.

  • Comment number 98.

    Can the companies that are after the Post Office afford us as they seem to be getting rid of people from their own country and I would find this worrying but it is the Royal Post Office which people forget and so has the Queens badge on it and what does she say, is that why she is e mailing these day? Since Thatcher and lets sell of Britian for next to nothing its been like this selling public owned companies and replacing them with nothing so making Britian empty of services not just in the cities but in the country its as if Britian because its an island is being closed down except for sponge city London which is over crowded and worse than it used to be and is as dirty and diseased as in Tudor times, and everywhere else pays for it.

    Were are those who us the post office to send letters as many people do not want to have a computer and were do they get their money from as people are still on benefits by chose which I doubt or not go? of course put all this in a supermarket at the back then you can shop as well guess which super market this will happen in? I want to know who are the major shareholders in the Royal Post Office now that would be interesting and how much will they get for the sale. People forget Brown is not voted in nor is Mandleson so who is their handler Blair? There is always more than we see.

  • Comment number 99.

    No 81

    The best suggestions to date and i totally agree. However it is too simple a solution so no doubt some won't accept it and there is also the issue of this government having the backbone to stand up to the unions. Oh wait maybe we could get a new goverment in........one with a backbone!

  • Comment number 100.

    This governement and the so-called oppostion are the biggest recruiting sergeants for mass dissent, civil war and outright bloody revolution we've had for three hundred years or more.
    So it's ok to pump hundreds or thousands of billions of pounds of our money into privately run banks, to fund the multi billion pound pension schemes of snake oil salesmen, at the same time they sell off our Royal Mail becasue they can't bail it out for a tiny fraction of the amount. Where did these toads come from? I know I never voted for any of them.

    They want to sell something to raise a little money, but the toy box is running empty.
    They sold their souls first, to big buisness. the price- thirty pieces of silver.

    may they rot in hell. they've certainly earned their place there.

 

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